When Bernanke Has a Problem, So Do the Banks
Mortgage applications are down for the seventh week in a row:
We know exactly what's causing potential borrowers to rethink their purchasing decisions. The national average rate on a 30-year fixed mortgage has risen to 4.36 percent from 3.40 percent in May, according to Bankrate.com. This equates to an extra $256 per month on a $500,000 mortgage. Blame Bernanke for suggesting the Fed may slow its bond-buying program.
The increase in borrowing costs threatens to derail healing in the housing market, where the Case-Shiller Price Index had finally started to rebound in March after having been sideways for seven months. Both purchases and refinancing have declined since the Fed chairman first presented the case for so-called tapering.
Lower borrowing means lower income for the banks. Traders and investors alike should question why banks are still hovering near their highs of the year, after their shares added 25 percent.
The analyst community has already taken notice, recently lowering estimates on a handful of lenders. We list them here for the exclusive benefit of our readers -- today's blog bonus: Comerica Inc. (CMA), Fifth Third Bancorp (FITB), Hudson City Bancorp (HCBK), PNC Financial Services Group Inc. (PNC), Regions Financial Corp. (RF), SunTrust Banks Inc. (STI), Wells Fargo & Co. (WFC), Zions Bancorporation (ZION). Note: Wells Fargo is the country's largest mortgage underwriter, accounting for one third of all U.S. mortgages.